Trading Strategies
After completing this reading, you should be able to: Explain the motivation to initiate a covered call or a protective put strategy. Describe principal-protected notes (PPNs) and explain necessary conditions to create a PPN. Describe the use and calculate the…
Case Study in Portfolio Management (Institutional SWF)
Financial Risks Faced by Institutional Investors LOS 7(a): discuss financial risks associated with the portfolio strategy of an institutional investor. Introduction: This module examines the unique financial risks and risk management frameworks related to portfolio strategy of long-term institutional investors…
Messages from the Academic Literature on Risk Management for the Trading Book
After completing this reading, you should be able to: Explain the following lessons on VaR implementation: time horizon over which VaR is estimated, the recognition of time-varying volatility in VaR risk factors, and VaR backtesting. Describe exogenous and endogenous liquidity…
VaR Mapping
After completing this reading, you should be able to: Explain the principles underlying VaR mapping, and describe the mapping process. Explain how the mapping process captures general and specific risks. Differentiate among the three methods of mapping portfolios of fixed…
Tokenization and Financial Market Inefficiencies
After completing this reading, you should be able to: Explain the process of tokenization and describe the fundamental features of tokenized assets and digital ledgers. Describe frictions and inefficiencies that can arise during different phases of an asset’s lifecycle and…
Global Financial Stability Report
After completing this reading, you should be able to: Identify and explain the key channels through which geopolitical risk influences asset prices and financial stability and discuss policy measures to address potential consequences. Analyze how global geopolitical risk events affect…
Advances in Artificial Intelligence: Implications for Capital Markets Activities
After completing this reading, you should be able to: Describe current uses of artificial intelligence (AI) and machine learning (ML) in capital markets, and potential future uses of sophisticated AI models including GenAI. Explain the implications of further adoption of…
Backtesting VaR
After completing this reading, you should be able to: Describe backtesting and exceptions and explain the importance of backtesting VaR models. Explain the significant difficulties in backtesting a VaR model. Verify a model based on exceptions or failure rates. Identify…
Market Risk Measurement and Management
1. Estimating Market Risk Measures 2. Non-Parametric Approaches 3. Parametric Approaches (II): Extreme Value 4. Backtesting VaR 5. VaR Mapping 6. Messages from the Academic Literature on Risk Management for the Trading Book 7. Some Correlation Basics: Properties, Motivation, Terminology 8. Empirical Properties of Correlation: How Do Correlations…
Estimating Default Probabilities
After completing this reading, you should be able to: Compare agencies’ ratings to internal credit rating systems. Describe linear discriminant analysis (LDA), define the Altman’s Z-score and its usage, and apply LDA to classify a sample of firms by credit…
